AUKUS risks unveiled – is Australia sleepwalking into a submarines disaster?

by Rex Patrick | Mar 12, 2024 | Comment & Analysis, Latest Posts

It’s risk that brings down projects. Over the past month, a number of serious risks have materialised in the AUKUS submarine program, yet the Government is just sleepwalking towards disasters. Former submarine industry project manager, Rex Patrick, reports on disturbing developments.

Risk is the enemy of project delivery. While a rookie project manager might try to focus on the project resourcing and scheduling required to achieve an intended performance, an experienced project manager will focus on risk. Materialised risk is what unravels a project.

There are many types of risks, some within the control of a project manager and others the project manager can only hope to influence or react to.

AUKUS has all sorts of risks. An honestly generated risk register for the project might look like this:

Political risk

From a future submarine project perspective, this has already materialised and fundamentally changed the project a number of times; the project went from a Rudd class ‘son-of-Collins’ submarine, to an Abbott class Japanese sub, to a Turnbull class French sub to a Morrison/Albanese class US/UK sub. 

Albanese backed Morrison’s scheme, but even if Albanese is lucky, he won’t be the Prime Minister of Australia in the decade our first AUKUS submarine arrives. Indeed, as the commissioning ceremony takes place, those not invited will likely be reading Albanese’s biography that they’ve plucked from a discount bin in a bookstore.

The protracted duration of the project magnifies the political risk of further chopping and changing.  

There’s also significant international political risk with AUKUS, but I’ll come to that shortly.

Economic risk

With AUKUS budgeted to cost $368B, the economic risk is extreme. The project will span decades, and there is no guarantee Australia will continue to enjoy its export-funded prosperity, especially as the country tries to dial back coal and LNG exports.

Already other Defence projects have been cancelled and curtailed as the AUKUS budget squeeze commenced.

Technical risk

Technical risks stem from novelty, uncertainty and complexity in a project. Whilst the Virginia class subs are well proven with little technical risk, the UK-AUKUS sub is a paper design with extreme technical risk.

Management risk

Management risk materialises when project staff lack domain knowledge and the necessary hardened shipyard experience. 

The AUKUS leadership team is filled with seasoned military officers, public servants and academics – but little actual shipyard experience. Sure, they’re capable people, but they’re not a hardened project dream team. For many of them the project is a stepping stone to another more senior role. 

Australia Submarine Agency leadership team

When the Navy’s Air Warfare Destroyer program ran into serious problems in the mid-2010s, the Government engaged Mark Lamarre as the CEO of ASC Shipbuilding. He had decades of experience working inside US shipyards. He turned the project around.

It’s a lesson not learned – and one desperately needed in the risk environment that is AUKUS.

Australia Submarine Agency Leadership Team

Australia Submarine Agency Leadership Team

Problems in the United States

The troubling thing is that the wheels have started to fall off the AUKUS billy cart.

On 22 December, the US Congress passed the 2024 National Defense Authorization Act, which will ‘permit’ the US Navy to transfer the first two of three to five Virginia class submarines to Australia. The moment was heralded by those in Government and the media who spruik AUKUS at every turn.  But they’ve glossed over the fine print.  

As always, the devil is in the details, and the US legislation contains some pretty significant caveats.

Caveats in the US Law (Source: Congress)

Caveats in the US Law (Source: Congress)

The bottom line is that a US President can kill the deal for subjective reasons at any time – if he or she is of the view the transfer is not consistent with US foreign policy and national security interests. They’re ‘Humpty Dumpty’ words that will mean just what the President chooses them to mean – nothing more, nothing less. 

It is also the case that if the US submarine industrial base is not building sufficient submarines, the President can’t authorise the transfer.

The magic build rate for the US is 2.3 subs per annum (to meet its attack and ballistic submarine needs, and Australia’s). Right now the build rate is at 1.4.

And it’s not only the construction side of the equation that’s lagging. US submarine maintenance is a shambles. There aren’t enough shipyards available across the board. There are acute shortages of personnel and expertise, and there’s a maintenance backlog that has taken on absurd proportions.  

Two weeks ago the US Navy announced it has finally started repair work on one nuclear attack submarine, USS Boise, that returned damaged from its last time at sea nine years ago. The overhaul will be completed by 2029, by which time that submarine will have been out of service for 14 years. 

Money please

The US Navy currently has only 49 nuclear attack submarines available versus their declared goal of at least 66 such vessels in active service. To increase their shipyard’s capacity Prime Minister Albanese has agreed to pour AUD$4.7B into the US submarine industrial base – thank you Aussie taxpayers – but the US Congress, to date, has failed to approve a close-to matching contribution. 

At the same time, the US Navy has only asked for funding for only one Virginia-class attack boat in its 2025 Fiscal Budget, a break from a steady two-per-year demand signal. This is a very strong signal that their industry cannot meet demand.

The US legislation highlighted above also says that Australia must provide “adequate funds and support” for additional capacity. Just what will be regarded as “adequate” may well prove contentious within Congress. We may well end up pouring even more Australian cash on to the vast dry sponge of US shipyards.  

There are no guarantee the US will actually deliver. US national interests will always take precedence. The Australian Submarine Agency seems to be wilfully ignoring this risk. They’ve not considered a fallback plan.

Problems in the UK

The decision to switch from a proven Virginia class submarine to undesigned UK submarines is one of the clearest examples of risk-loading a project. Who in their right mind would pick a proven sub-design like the Virginia class, purchase three of them, build up a capability to support them, and then switch to a paper design with a completely different set of support requirements?

It’s a dumb proposition! But that’s our Defence Department for you.

The state of Britain’s submarine enterprise is nothing short of a disaster. Neither of the two most recent submarine programs, the Astute nuclear attack sub nor the Dreadnought nuclear ballistic sub, have been shining project management examples.

Rex Patrick on AUKUS submarines: “an astonishingly bad deal”

The first Astute submarine was delivered 57 months late and 53 per cent (or AUD$2.6 billion) over budget. 

Two weeks ago, the British MOD announced a billion-dollar contract to extend the life of the predecessor class to the planned Dreadnought class subs. This is official confirmation that the Dreadnought program is running significantly behind schedule. Being critical to the UK’s nuclear deterrence strategy, it will take priority over the SSN AUKUS.

Anyone willing to look will see that we are lining up for significant delay in the submarine that will follow-up our Virginia class submarines. Given the risks of the Virginia submarines not being transferred, we may not see a new submarine until well into the 2040s; more than two decades away.

Again, no fallback.

A project experience vacuum

By this time, the reader will rightfully have their hands on their shaking heads. “Can this be happening”?

It is!

Time and time again the Defence Department has bought us timely and costly failures in the delivery of future capability.

Dumb Ways to Buy: Defence “shambles” unveiled – former submariner and senator Rex Patrick

Any organisations that run serious projects employ professional and highly experienced project managers. They let newly minted project managers run small projects before they’re allowed to go anywhere near a large project. Mega-projects are only left to the most experienced project managers leading teams with deep experience.

Defence does not do that.

Admiral Jonathon Meade, the head of the Australian Submarine Agency, has had a distinguished naval career. He is to be respected in that regard. But the sad fact is that the person placed in charge of the mega-project that is the AUKUS submarine project has not run a large project before; in fact, he hasn’t even run a small one.

And so even as risks start to materialise the unhealthy optimism of inexperience reigns. After all, everyone’s enjoying life. There are overseas trips, high-level meetings and the sense of importance that comes from being part of something big. And there’s no real accountability.  

And there will be no accountability when the project failure starts to bite the taxpayer, who will ultimately bear the cost, along with the Collins Class submarine sailors who may be asked to go into harm’s way in 35-year or older submarines. No one in charge now will be around.

One might have hope that political oversight would have led us to a different place. It hasn’t. Our politicians understand risk even less than the war fighters making recommendations to them at Cabinet. They’ve busily signed up to a future of writing remedy cheques the Australian taxpayer, and the rest of the Defence Force, can’t afford.

AUKUS Gravy Plane: $633K a month in flights with the taxpayer picking up the tab

 

Rex Patrick is a former Senator for South Australia and earlier a submariner in the armed forces. Best known as an anti-corruption and transparency crusader - www.transparencywarrior.com.au.

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